Substitute House Bill No. 6658
Substitute House Bill No. 6658
PUBLIC ACT NO. 97-113
AN ACT CONCERNING PRIORITY OF DISTRIBUTION UNDER
THE INSURERS REHABILITATION AND LIQUIDATION ACT.
Be it enacted by the Senate and House of
Representatives in General Assembly convened:
Section 1. Section 38a-944 of the general
statutes is repealed and the following is
substituted in lieu thereof:
(a) The priority of distribution of claims
from the insurer's estate shall be in accordance
with the order in which each class of claims is
[herein] set forth IN THIS SECTION. Every claim in
each class shall be paid in full or adequate funds
retained for such payment before the members of
the next class receive any payment. No subclasses
shall be established within any class. No claim by
a shareholder, policyholder or other creditor
shall be permitted to circumvent the priority
classes through the use of equitable remedies. The
order of distribution of claims shall be:
(1) Class 1. The costs and expenses of
administration, including but not limited to the
following: (A) The actual and necessary costs of
preserving or recovering the assets of the
insurer; (B) compensation for all services
rendered in the liquidation; (C) any necessary
filing fees; (D) the fees and mileage payable to
witnesses; (E) authorized reasonable attorney's
fees and other professional services rendered in
the rehabilitation and liquidation; (F) the
reasonable expenses of a guaranty association or
foreign guaranty association in handling claims.
[(2) Class 2. Reasonable compensation to
employees for services performed to the extent
that they do not exceed two months of monetary
compensation and represent payment for services
performed within one year before the filing of the
petition for liquidation or, if rehabilitation
preceded liquidation, within one year before the
filing of the petition for rehabilitation.
Officers and directors shall not be entitled to
the benefit of this priority, except as otherwise
approved by the liquidator and the court. Such
priority shall be in lieu of any other similar
priority which may be authorized by law as to
wages or compensation of employees.
(3)] (2) Class [3] 2. All claims under
policies including such claims of the federal or
any state or local government for losses incurred,
including third party claims and all claims of a
guaranty association or foreign guaranty
association OTHER THAN THOSE INCLUDED IN CLASS 1.
All claims under life insurance policies, annuity
contracts and funding agreements, whether for
death proceeds, annuity proceeds, or investment
values shall be treated as loss claims. That
portion of any loss, indemnification for which is
provided by other benefits or advantages recovered
by the claimant, shall not be included in this
class, other than benefits or advantages recovered
or recoverable in discharge of familial
obligations of support or by way of succession at
death or as proceeds of life insurance, or as
gratuities. No payment by an employer to his
employee shall be treated as a gratuity.
(3) CLASS 3. CLAIMS OF THE FEDERAL GOVERNMENT
EXCEPT THOSE UNDER CLASS 2.
(4) CLASS 4. REASONABLE COMPENSATION TO
EMPLOYEES FOR SERVICES PERFORMED TO THE EXTENT
THAT THEY DO NOT EXCEED TWO MONTHS OF MONETARY
COMPENSATION AND REPRESENT PAYMENT FOR SERVICES
PERFORMED WITHIN ONE YEAR BEFORE THE FILING OF THE
PETITION FOR LIQUIDATION OR, IF REHABILITATION
PRECEDED LIQUIDATION, WITHIN ONE YEAR BEFORE THE
FILING OF THE PETITION FOR REHABILITATION.
OFFICERS AND DIRECTORS SHALL NOT BE ENTITLED TO
THE BENEFIT OF THIS PRIORITY, EXCEPT AS OTHERWISE
APPROVED BY THE LIQUIDATOR AND THE COURT. SUCH
PRIORITY SHALL BE IN LIEU OF ANY OTHER SIMILAR
PRIORITY WHICH MAY BE AUTHORIZED BY LAW AS TO
WAGES OR COMPENSATION OF EMPLOYEES.
[(4)] (5) Class [4] 5. Claims under
nonassessable policies for unearned premium or
other premium refunds and claims of general
creditors, including claims of ceding and assuming
companies in their capacity as such, and claims
against the insurer for liability for bodily
injury or for injury to or destruction of tangible
property which are not under policies.
[(5)] (6) Class [5] 6. Claims of [the federal
or] any state or local government, except those
under class [3] 2. Claims, including those of any
SUCH governmental body for a penalty or
forfeiture, shall be allowed in this class only to
the extent of the pecuniary loss sustained from
the act, transaction or proceeding out of which
the penalty or forfeiture arose, with reasonable
and actual costs occasioned thereby. The remainder
of such claims shall be postponed to the class of
claims under subdivision [(7)] (8) of this
subsection.
[(6)] (7) Class [6] 7. Claims filed late or
any other claims other than claims under
subdivisions [(7) and] (8) AND (9) of this
subsection.
[(7)] (8) Class [7] 8. Surplus or
contribution notes, or similar obligations, and
premium refunds on assessable policies. Payments
to members of domestic mutual insurance companies
shall be limited in accordance with law.
[(8)] (9) Class [8] 9. The claims of
shareholders or other owners in their capacity as
shareholders.
(b) Every claim under a separate account
agreement providing, in effect, that the assets in
the separate account shall not be chargeable with
liabilities arising out of any other business of
the insurer shall be satisfied out of the assets
in the separate account equal to the reserves
maintained in such account for such agreement and,
to the extent, if any, not fully discharged
thereby, shall be treated as a class [3] 2 claim
against the estate. For the purposes of this
section, the "insurer's estate" shall mean the
general assets of such company less any assets
held in separate accounts that, pursuant to
section 38a-433 or 38a-459, are not chargeable
with liabilities arising out of any other business
of the insurer.
Sec. 2. This act shall take effect from its
passage and shall apply to all insurer liquidation
proceedings pending on or after said effective
date.
Approved June 6, 1997